High court weighs Kauai tax case

The two sides focus on different aspects of a rollback's legality

As values of island homes stay high, a fight over a charter amendment to roll back rising property taxes on Kauai went before the Hawaii Supreme Court yesterday.

Rather than arguing opposing sides in the case originally brought by the county, each side focused on different questions.

"You don't have to decide if this is the best case, just if this case is good enough. And our answer there is no," said Robert Thomas, an attorney with Pacific Legal Foundation, after the hearing yesterday morning.

Meanwhile, Gary Slovin, outside counsel for Kauai County, said the critical question is whether the county's real property tax system should be subject to ballot amendments.

The Charter amendment approved in the November 2004 election rolled back property taxes to 1998 levels for those who have lived in their homes since then. For people who bought after 1998, taxes would be based on the assessed value at purchase. Annual tax increases for all homeowners would be capped at 2 percent starting in 2006.

Thomas represents four Kauai residents trying to overturn a lower court ruling that struck down the voter-approved amendment.

Rather than waiting for a taxpayer or someone else with a grievance to sue the county government, the county filed its own lawsuit -- with the county attorney's office representing both sides in the case, Thomas said.

Yet, the county as plaintiff could not prove it was damaged by the voter action, he said, and the Hawaii Supreme Court has always required proof of injury to bring a lawsuit.

Slovin argued that ballot amendments should not be allowed to shoot down tax decisions made by county government, which could never assure that its financial needs would be met by property taxes. "If this procedure is acceptable, then there's no limit to what kind of amendments could be advanced in the future," he told the justices.

Slovin pointed to a County Charter provision prohibiting voters from changing tax laws by initiative, whereby voters petition for an ordinance. "If the charter says you can't do it by initiative, you can't back-door that by doing it by ballot amendment," Slovin said later.

Slovin began his argument before the justices by describing how the case involves the county's ability to put together a budget.

But he was soon interrupted by Chief Justice Ronald Moon, who asked him whether the county had claimed any threat of injury in the case.

"You're saying that it (the case) goes to a very critical aspect of collecting the budget. I think I agree with you. But I don't believe that was alleged," Moon said.

Kauai property owners, like most in the islands, have struggled under escalating property taxes.

Six months after the amendment was approved by voters, the County Council passed its own ordinance capping increases on owner-occupants' taxes at 2 percent.